In a stunning early finding of interviews with nearly a dozen social media agencies and software providers, I’m seeing a new trend: Social media agency of record (SMaoR) are now moving into advertising buying. I’ve just spent a week interviewing a number of social agencies here in Manhattan as well as taken briefings from around the globe (see below for source info)

Why this dramatic change from social media purists who once declared war on advertising?

The new advertising features from both Facebook and Twitter (Such as sponsored tweets and trends) encourage earned content to become advertising units and give an opportunity for social marketers to get into the advertising game. This also means the opportunity for ads to perform at a higher level because they’ve been ‘approved’ by the crowd is a unique opportunity afforded to the social media agencies vs the ‘carpet bomb’ approach of yesteryear. This results in three distinct impacts to the industry:

Advertising is Limited to Social Networks: The advertising units that these agencies are purchasing are often limited to Facebook or Twitter –not broader banner and skyscraper ads across media and Google serp. In fact, in most cases they’re analyzing which earned content performs the best, then using the features like Twitter’s sponsored tweets to amplify this earned content to reach new audiences and drive attention or call to action.

Social Media Agencies Don’t Have Solid Case Studies, Yet. Most of these pure play social media firms lack an advertising background and are staffed for engagement. They also tend to have a longer term approach for community building –not six week ad block flights. As a result, it doesn’t guarantee that they’ll be able to outperform traditional digital advertisers although most say they’re working on case studies to show higher engagement, and conversion.

Expect a Battle Between Digital Agencies and Social Media Agencies. Now, there’s going to be a fight over advertising budget as social media agencies battle for small shares of advertising dollars. We’re also seeing digital agencies develop social competencies and battling the social pure plays. In the end, I believe we’ll get rid of the term ‘social’ or ‘digital’ as a prefix for any agency as they’ll all have the same competencies, esp after a mass M&A that biz dev execs are already starting to sniff.

Sources: As an Industry Analyst, I’m fortunate to speak to many in the industry for research purposes, In the past few weeks I’ve spoken to Adobe, Attention, Banyan Branch, Big Fuel, Buddy Media, Converseon, Deep Focus, Edelman, Google+, IBM (Social Products), LiveWorld, SocialFlow, VaynerMedia, We Are Social, and many others. Our analyst focused on agencies is Rebecca Lieb (Blog, Twitter), although we’re both talking to many-in-the-industry for our upcoming joint report on Paid Owned and Earned integration.